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The Impact of Terrorism on the Defense Industry

Author

Listed:
  • Claude Berrebi
  • Esteban F. Klor

Abstract

This paper analyzes the impact of terrorism on Israeli companies related to the defense, security or anti-terrorism industries, relative to its impact on the rest of the companies. The authors match every Israeli company to the American company with the closest expected return among all the companies that belong to the same industry and trade in the same market in order to isolate the effect of terrorism from other common industry shocks. The findings show that whereas terrorism had a significant negative impact of 5% on non defense-related companies, it had a significantly positive overall effect of 7% on defense-related companies.

Suggested Citation

  • Claude Berrebi & Esteban F. Klor, 2008. "The Impact of Terrorism on the Defense Industry," Working Papers WR-597, RAND Corporation.
    • Handle: RePEc:ran:wpaper:wr-597
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    Keywords

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    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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